Gades v. Meyer Modernizing Co.

#27209-a-DG
2015 S.D. 42

IN THE SUPREME COURT
OF THE
STATE OF SOUTH DAKOTA

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BLAIR GADES and LYNN GADES, Plaintiffs and Appellants,

v.

MEYER MODERNIZING CO., INC., Defendant and Appellee.

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APPEAL FROM THE CIRCUIT COURT OF
THE FIRST JUDICIAL CIRCUIT
DAVISON COUNTY, SOUTH DAKOTA

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THE HONORABLE TIMOTHY W. BJORKMAN
Judge

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JAMES D. TAYLOR of
James D. Taylor, PC
Mitchell, South Dakota Attorneys for plaintiffs and
appellants.

MATTHEW D. MURPHY
ROGER A. SUDBECK of
Boyce, Greenfield, Pashby &
Welk, LLP
Sioux Falls, South Dakota Attorneys for defendant and
appellee.

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CONSIDERED ON BRIEFS
ON MARCH 23, 2015
OPINION FILED 06/03/15
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GILBERTSON, Chief Justice

[¶1.] Blair and Lynn Gades appeal the circuit court’s determination that

their cause of action was time barred, as well as the court’s order granting summary

judgment in favor of Meyer Modernizing Co., Inc. (Meyer). The Gadeses assert

there are genuine disputes of material fact as to the date of accrual of their cause of

action. They also assert Meyer concealed the existence of their cause of action. We

affirm.

Facts and Procedural History

[¶2.] The facts of this case are largely undisputed. 1 In 2000, the Gadeses

engaged Enercept, Inc.—a manufacturing company located in Watertown, South

Dakota—to design and manufacture the structural insulated panels 2 used to

construct their home in Mitchell, South Dakota. The Gadeses did not hire a general

contractor to oversee the actual construction of their home; instead, Blair Gades

assumed that role himself. In early 2000, the Gadeses hired Master Builders of

Avon—a Minnesota entity—to install the footings, erect the Enercept panels, finish

and shingle the roof, install the windows and doors, and apply the house wrap.

1. Meyer submitted a statement of material facts in compliance with SDCL 15-
6-56(c)(1). Of Meyer’s 17 separate factual assertions, the Gadeses
controverted only one.

2. A structural insulated panel (SIP) system is an alternative building
technique to a traditional “stick-framed” structure. A SIP is a composite
building material that usually consists of a rigid insulation core, such as
polystyrene foam, laminated between two layers of engineered wood particle
board. SIPs are premanufactured and then shipped to the construction site
for assembly.

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[¶3.] On April 3, 2000, the Gadeses hired Meyer to install the siding, soffits,

and gutters on the home. The estimate offered by Meyer and accepted by the

Gadeses did not mention, or include charges for, the installation of flashing around

the windows and doors. 3 By the time Meyer installed the siding, Master Builders

had already installed all of the windows, doors, and house wrap. The home was

substantially completed, and the Gadeses moved into the home, by late 2000.

[¶4.] As early as spring 2001, but no later than 2002, the Gadeses first

noticed water infiltration around window and door openings during rain and wind

events. 4 This water infiltration resulted in standing water on the window sills and

seepage into the door trim and floors. Similar instances of water infiltration have

occurred every year since the Gadeses moved into their home, with some years

seeing as many as 10 to 12 such incidents. The totality of the Gadeses’ asserted

injury in this case stems from these water infiltrations, the natures of which have

not changed since first manifesting. Since first becoming aware of the problem, the

Gadeses have not performed any corrective work on the home. 5

3. In its statement of material facts, Meyer asserted, “Defendant did not agree
to install and the contract did not include any charge for flashing around the
home’s windows and doors.” While the Gadeses agree the estimate did not
mention the installation of flashing around the windows and doors, they
nevertheless dispute the conclusion that Meyer did not agree to install such
flashing.

4. The Gadeses admit Blair Gades first noticed water infiltration in 2001. They
also admit Lynn Gades first noticed water infiltration “in 2001 or 2002 at the
latest.”

5. Despite failing to controvert Meyer’s statement that no repair work has taken
place since 2001, the Gadeses’ brief to this Court claims Meyer returned to
the home in 2004 or 2005 and “reworked substantial portions of the siding, in
(continued . . .)
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[¶5.] The Gadeses retained counsel in this matter by April 11, 2005.

However, they did not bring suit regarding their water infiltration claim until April

2010. They amended their complaint in 2013 to include the assertion that Meyer

concealed the absence of installed flashing. Meyer moved for summary judgment,

which the circuit court granted.

[¶6.] The Gadeses raise one issue on appeal: Whether there is a genuine

dispute of material fact as to the date of accrual of their cause of action.

Standard of Review

[¶7.] “In reviewing a grant or a denial of summary judgment under SDCL

15-6-56(c), we must determine whether the moving party demonstrated the absence

of any genuine issue of material fact and showed entitlement to judgment on the

merits as a matter of law.” Peters v. Great W. Bank, Inc., 2015 S.D. 4, ¶ 5, 859

N.W.2d 618, 621 (quoting Saathoff v. Kuhlman, 2009 S.D. 17, ¶ 11, 763 N.W.2d 800,

804). If the moving party properly supports the motion, the nonmoving party may

only avoid summary judgment by “set[ting] forth specific facts showing that there is

a genuine issue for trial.” SDCL 15-6-56(e). Any material fact asserted by the

moving party in support of the motion for summary judgment is deemed admitted

by the nonmoving party unless controverted. SDCL 15-6-56(c)(3). We view the

________________________
(. . . continued)
response to Gades’ [sic] complaints about water penetration.” However, this
account is further contradicted by Blair Gades’s 2014 deposition, in which
Meyer’s counsel asked him, “I mean, there’s been some investigation, but
there hasn’t actually been any reflashing or flashing that’s been done or
caulking or anything like that.” Gades responded, “No.” According to Meyer,
it sent an employee to inspect the Gadeses’ home in 2004 or 2005, but the
employee merely removed a small portion of siding and determined the water
infiltration was not occurring as a result of any of Meyer’s work.

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evidence “most favorably to the nonmoving party and [resolve] reasonable

doubts . . . against the moving party.” Peters, 2015 S.D. 4, ¶ 5, 859 N.W.2d at 621

(quoting Saathoff, 2009 S.D. 17, ¶ 11, 763 N.W.2d at 804). “If there exists any basis

which supports the ruling of the trial court, affirmance of a summary judgment is

proper.” Id. (quoting Saathoff, 2009 S.D. 17, ¶ 11, 763 N.W.2d at 804).

Analysis and Decision

[¶8.] There does not appear to be a genuine dispute as to the applicable

period of limitation in this case. 6 SDCL 15-2-13(1) provides that “[a]n action upon a

contract, obligation, or liability, express or implied,” may only be filed “within six

years after the cause of action shall have accrued[.]” The Gadeses assert there are

genuine issues of material fact as to the beginning of this six-year period. First, the

Gadeses assert Meyer knew flashing had not been installed and that “Meyer

actively concealed the lack of flashing[.]” The Gadeses allege Meyer maintained

this concealment “at least from 2004 or 2005 when it undertook additional work if

6. The Gadeses argued to the circuit court that their action was timely based on
the ten-year period of repose established in SDCL 15-2A-3. In their brief to
this Court, the Gadeses again assert, if only in passing, that “they
commenced their action well within the time allowed for actions for
construction deficiencies.” It is unclear whether the Gadeses intend this
mention to be an affirmative assertion that their claim is timely, or if it was
offered merely in anticipation of an argument from Meyer regarding the ten-
year period of repose. Regardless, a period of repose “is not designed to allow
a reasonable time for the filing of an action once it arises.” Peterson ex rel.
Peterson v. Burns, 2001 S.D. 126, ¶ 41, 635 N.W.2d 556, 570 (quoting Zacher
v. Budd Co., 396 N.W.2d 122, 129 n.5 (S.D. 1986)). Thus, SDCL 15-2A-3 does
not operate to extend the time for filing an action otherwise barred by the
running of the applicable period of limitation. Id. (quoting Zacher, 396
N.W.2d at 129 n.5).

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not from initial installation.” Finally, the Gadeses assert they were not “actually

aware of the lack of flashing” until October 2013.

[¶9.] As indicated in the previous paragraph, the Gadeses were permitted to

file their cause of action within six years of its accrual. SDCL 15-2-13(1). The

Gadeses assert they were not “actually aware of the lack of flashing” until October

2013. “A claim accrues when a plaintiff has actual or constructive notice of a cause

of action.” E. Side Lutheran Church of Sioux Falls v. NEXT, Inc., 2014 S.D. 59,

¶ 10, 852 N.W.2d 434, 438 (emphasis added). 7 Because “[e]very person who has

actual notice of circumstances sufficient to put a prudent man upon inquiry as to a

particular fact, and who omits to make such inquiry with reasonable diligence, is

deemed to have constructive notice of the fact itself[,]” SDCL 17-1-4, “[a] claim can

accrue ‘even when one may not yet know all the underlying facts or the full extent of

damages[,]’” E. Side Lutheran Church, 2014 S.D. 59, ¶ 14, 852 N.W.2d at 439-40

(quoting Strassburg v. Citizens State Bank, 1998 S.D. 72, ¶ 13, 581 N.W.2d 510,

515). Thus, “[s]tatutes of limitations begin to run when plaintiffs first become

aware of facts prompting a reasonably prudent person to seek information about the

7. The Gadeses’ assertion that they were not aware of the absence of flashing
until October 2013 is contradicted by their and their attorney’s prior
statements. In their complaint, dated April 16, 2010, the Gadeses asserted
the following: “The seamless metal siding was installed improperly as related
to penetrations through the siding envelope lacking, at least, proper flashing
around windows, doors, and other exterior penetrations and other unknown
deficiencies allowing water to enter the interior of Plaintiffs’ personal
residence.” (Emphasis added.) The Gadeses’ assertion is further
contradicted by a letter their attorney sent to Meyer on April 11, 2005, which
states: “The combination of improperly installed and wrongly sized siding to
window trim, and the apparent omission of any flashing, results in rain and
water entering the exterior walls at the joint between the windows and the
siding.” (Emphasis added.)

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problem and its cause.” Id. ¶ 14, 852 N.W.2d at 440 (quoting Strassburg, 1998 S.D.

72, ¶ 13, 581 N.W.2d at 515) (internal quotation marks omitted).

[¶10.] The Gadeses were aware of facts sufficient for their cause of action to

accrue by at least spring 2002. By virtue of not controverting Meyer’s statement of

undisputed material facts, if nothing else, the Gadeses admitted the following: Blair

Gades became aware of water infiltration in 2001, Lynn Gades was aware of water

infiltration no later than 2002, and the water infiltration has recurred every year

since they moved into their home. These admissions make this case nearly identical

to the relevant facts of East Side Lutheran Church. There, the plaintiff became

aware of water infiltration problems within months of the substantial completion of

a new addition to its church, but failed to file suit within six years of its discovery of

the water infiltration. E. Side Lutheran Church, 2014 S.D. 59, ¶¶ 2-6, 852 N.W.2d

at 436-37. “It [was] undisputed [the plaintiff] knew water infiltration existed

throughout the building almost immediately after construction was completed . . . .”

Id. ¶ 12, 852 N.W.2d at 439. Thus, like the present case, there was no genuine

issue of material fact as to whether the plaintiffs had actual notice of water

infiltration prior to six years before the commencement of their action. Id. We held,

as we hold in the present case, “Because [the plaintiff’s] actual notice of the water

infiltration gave rise to a situation where [the plaintiff] could have filed suit and

sought relief, any claim with a sufficient relationship to the water infiltration . . .

accrued and statutorily lapsed prior to [the plaintiff’s] . . . lawsuit.” Id.

[¶11.] Despite the foregoing, the Gadeses argue East Side Lutheran Church

supports their assertion that there is a genuine dispute of material fact as to when

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their cause of action accrued. Specifically, they quote the following language from

East Side Lutheran Church: “Because what a reasonably prudent person should

inquire into when learning of water infiltration can differ depending on the

circumstances, we conclude there is a genuine issue of material fact as to when East

Side’s structural design error and construction error claims accrued.” Id. ¶ 15, 852

N.W.2d at 440. According to the Gadeses, “this is precisely the issue in this

instance.” The Gadeses misapprehend this quoted portion of East Side Lutheran

Church. We used the terms structural design error and construction error to

designate claims potentially distinguishable from the plaintiff’s water infiltration

claim. Id. ¶ 13, 852 N.W.2d at 439. At that point in the opinion—three paragraphs

after we had already plainly stated the plaintiff’s water infiltration claim had

accrued prior to six years before the plaintiff commenced its action—we discussed

whether the plaintiff’s actual notice of water infiltration also served as notice of

possible design and construction defects. Id. ¶¶ 12-16, 852 N.W.2d at 439-41. In

the present case, and in contrast to the plaintiff in East Side Lutheran Church, the

Gadeses admit the entirety of their claim relates to the asserted water infiltration.

Therefore, based on the Gadeses’ admissions alone, there can be little argument

that their cause of action accrued in 2002, regardless of when they “actually”

became aware of the absence of flashing.

[¶12.] Next, the Gadeses assert that Meyer did not disclose its knowledge

that no flashing had been installed on their home and that, instead, Meyer insisted

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that the installed “J-Channel” was sufficient. 8 Therefore, they conclude, the statute

of limitations should be tolled. “[F]raudulent concealment applies . . . when

actionable conduct or injury has been concealed by deceptive act or artifice.”

Strassburg, 1998 S.D. 72, ¶ 14, 581 N.W.2d at 515. In the absence of “a confidential

or fiduciary relationship,” a plaintiff alleging fraudulent concealment must allege

“some affirmative act or conduct on the part of the defendant designed to prevent,

and which does prevent, the discovery of the cause of action.” Id. (quoting Koenig v.

Lambert, 527 N.W.2d 903, 905-06 (S.D. 1995), overruled on other grounds,

Stratmeyer v. Stratmeyer, 1997 S.D. 97, 567 N.W.2d 220) (internal quotation marks

omitted). Here, the Gadeses do not claim, and the record does not suggest, a

relationship of trust or confidence between the Gadeses and Meyer. “Fiduciary

duties . . . are not inherent in normal arm’s-length business relationship[s] and

arise only when one undertakes to act primarily for another’s benefit.” Cleveland v.

BDL Enters., Inc., 2003 S.D. 54, ¶ 18, 663 N.W.2d 212, 218 (quoting Schwaiger v.

Mitchell Radiology, 2002 S.D. 97, ¶ 19, 652 N.W.2d 372, 380) (internal quotation

marks omitted). 9 Therefore, the Gadeses are required to prove some affirmative act

on Meyer’s part, that Meyer designed such act to prevent the Gadeses from

detecting their cause of action, and that they were actually prevented from

discovering their cause of action.

8. “J-Channel” is the name given to the material used to bind the siding Meyer
installed to openings such as windows and doors.

9. The existence and scope of a fiduciary duty is a question of law. Cleveland,
2003 S.D. 54, ¶ 18, 663 N.W.2d at 218.

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[¶13.] A detailed discussion of the Gadeses’ fraudulent concealment

argument is not necessary, however, as it fails on the very same facts that establish

the accrual of their cause of action: their actual knowledge of the water infiltration

dating from at least 2002. Even if Meyer had somehow fraudulently concealed the

absence of flashing, “[f]raudulent concealment will not toll the statute of

limitations, no matter the nature of the concealment, if a plaintiff is already on

notice of a cause of action.” Strassburg, 1998 S.D. 72, ¶ 15, 581 N.W.2d at 516.

Similarly, establishing fraudulent concealment will not toll the period of limitation

beyond the moment “the claim is discovered or might have been discovered with

reasonable diligence.” Id. ¶ 14, 581 N.W.2d at 515. As we have already discussed,

the Gadeses were put on notice of their cause of action by repeated and obvious

water infiltrations occurring year after year since they first occupied their home. It

would have been exceedingly difficult, if not impossible, for Meyer to conceal the

water infiltration from the Gadeses. 10 As the circuit court correctly noted,

“Defendant had no ability to keep Plaintiffs from discovering the facts constituting

their claim.”

Conclusion

[¶14.] “The right to be free of stale claims in time comes to prevail over the

right to prosecute them.” Id. ¶ 8, 581 N.W.2d at 514 (quoting United States v.

Kubrick, 444 U.S. 111, 117, 100 S. Ct. 352, 357, 62 L. Ed. 2d 259 (1979)). By their

10. Lynn Gades admitted watching water run down a fabric shade and
accumulating on a window sill during the first water intrusion. The Gadeses
have not suggested that Meyer had any means of concealing such
manifestations of water infiltration inside the home.

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own admissions, the Gadeses were well aware of the repeated water infiltrations

into their home beginning in 2001 or 2002, and the entirety of their claim relates to

those water infiltrations. Any alleged concealment on Meyer’s part, even if proved

at trial, would not change the fact that the Gadeses had notice of their cause of

action by 2002. Thus, the Gadeses’ cause of action accrued in 2002, if not before,

and they have offered no reason why the period of limitation should be tolled. The

law does not permit the Gadeses to sit on an accrued cause of action for eight years

and still prosecute their claim. We affirm.

[¶15.] ZINTER, SEVERSON, WILBUR and KERN, Justices, concur.

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